talked about the operations. they said can we come out next month and we are interested in developing a terminal with you. we set up a meeting of this group. i have a picture of them. they are coming to san francisco. as a result of the meeting we didn't expect to have with somebody who happened to know somebody else. it was just staggering. we had a sales call with is aing a force carrier, their general manager from brazil. a lot of the cargo sourced here is coming from shanghai. it we did travel to beijing and do we need to build or not? you got my vote that we do need to build it because we were able to travel to

beijing, it was smoother than bart and on time and were there in 2-and-a-half hours. it's a great infrastructure and we should emulate and copy. while in beijing, we had a number of good meetings, the first was with china osha shipping company. we didn't meet with staff, we met with the chairman way who is a very impressive fellow and he did explain to us, we told him about our bulk operation, he said that costco has the largest bulk fleet in the world and he negotiated to have this done in the port project. lastly one of the highlights of the trip

professionally it was a highlight for me too was commission adams through his connections, his friendship, really set up a meeting with am bass bassador with the us embassy. they were so gracious with their time. he went an hour with him in his chambers with a number of his commercial staff, department of commerce staff, to discuss trade and labor issues, our port. he was a very interested guy and it was a fantastic meeting. so we had a good meeting but now the real hard work beginnings, we have a lot of follow up. we have a meeting with shanghai who are coming to san francisco to meet with us. we have to follow up with

costco and we need to forward some contracts to governor brown's office. as you know governor brown is head to go china in the next couple weeks. he wants to make sure we are invited to his reception. we have a lot of work to company and it was a fantastic trip. i want to thank commissioner adams and jim for their patience and great work. i have learned that hanging out with commissioner adams. today we've the youngest senator in the united states, senator brian shots from hawaii was in the lobby and we had a chance to give him a tour of our port. i have met ambassadors and senators. i don't know what's next. that's it for my report. thank you for your time. >> i think commissioner adams were you going to say an n a

few words? >> first of all i want to thank peter and jim. it's really a world class trip that we took. we were treated like heads of states and really with the port of san francisco we owned the world stage and i really think we lived up to the billing. the port of shanghai is the largest port in the world. shanghai is a city with it's own twist and twang. just buildings everywhere. we met with the union there, they are the largest union. we went to a great bulk facility. i can see it happening here in the port of san francisco as wii we

bring in steel, lumber. it was really good and i think with the hard work. another thing about the port of shanghai is they are getting big into the cruising industry. they are getting up to 250,000 passengers and in 3 years they hope to get over a million passengers. the city's relationship was great. gary lock, the ambassador of china, i have known him in the state legislature, i worked on his campaign as governor, i wrote a letter when he became am bassador in china, one thing about gary is very humbling about the guy is that they grew up in the housing projects in seattle. when he landed in

beijing, he had his backpack and tennis shoes and was getting ready to get in the cab. the china -- they were saying, what are you doing. we had a really good time with him. that was the first time i have had an ambassador pour me tea. president obama sent jack lu there and it was really exciting. that reform and everything that was happening in china. so it was really good. as i told our guys, we have some good contacts, but we have to follow up. one of the things about china is they made it clear, we don't like conference calls. we don't like talking on the phone. we want to sit down and break bread with you. we invest with

people. i think that was so important and so hands-on. i want to mention about the chairman of costco. chairman wi. costco now is the second largest shipment in the world. he told a story to me and jim and peter which i thought was really i was in. he said i have been the chairman of costco since 1997. business is a funny animal. he says you can take a business up and take your business to the ground. he was so right on, because when you are in china, when you are 60 you have to retire. he's getting close to that age and he's got the other guys there and he said they are going to be running the show. i thought it was good that he talked about that. i'm going to talk about it today, we have my

friend here senator brian shots. the us senator from hawaii. a little bit about brian, he shows up today in the lobby and everybody thought he would have security guards with him. he was waiting for me. we went upstairs and had a great meeting and took him to the cruise terminal. at 40 years old, he started out as 40 as the us senator, went to school in california. he worked in the state legislature in hawaii for 4 terms, he was chairman of the democratic party in hawaii and then as lieutenant governor and when senator died here in december he was at that period by the governor to to finish the term. he's coming back in a month-and-a-half and i'm giving

him a tour of the port. especially with meritime and saying that i want to thank f x crowley, the commissioner and he also saw a need with that and want to thank president wu hau, and i think this is important and meritime is really important to me and i think this trip helped to take us to the next level, but as i said we have to follow-up. thank you. >> concludes my report. >> just a public comment? i just had a comment. what are the other restaurants that michael has in napa? do you know? >> he has napa style which i understand is not only the tv show but also the name of a store that he has that does --

so you know that one. he also has botega, and napa style are the three properties he owns plus the winery. >> you also attended a cruise industry conference. >> sure, michael and i went to cruising miami as c trade. it is a the international cruise conference where all the ports around the world attend and their lines and they send their presidents and executive directors who make a point to meet with many of us from the ports and they also do an industry panel and some of

which adams is mentioned that asia is a market for cruising which they have not seen in a long time. the cruising grew in the first decade in the century by not only the number of ships, but the size of the ships and the number of ships being build has dropped considerably from what we have seen in the last 10 years. the affordability of california as it relates to environmental issues weighs heavily on their minds and hoping that the e p a will guide worldwide standards and not just for california or united states waters. we were recognized over and over again for our new cruise ship terminal. we are there with port with doing what they call

reclamation projects where they are building multiple terminals to immediate multiple demand of ships. it was san francisco that got the most kudos and we were very pleased to participate in a joint conference, with cruise, the baltics and from air from copenhagen to san francisco and it sold out. so we started a great partnership there. copenhagen does around 450 calls per year. we do 65-70. it was great to be invited to that. i guess lastly i would men mention that we had a chance to visit members including the architect for

james arm an cruise terminal. it was great to hear from them and they have chose to do the project if they go forward but it's having changes in ownership. i don't know if there is anything i left out, i'm sure i did, but it was a very good visit and as i said it was great to be so widely recognized for our new temperature natural. so really proud of that. >> thank you. >> item on the consent calendar. item 9 a requests contract no. 274 r ventilation upgrade project to extend the contract duration by an additional 184 days to complete

the project. >> so moved. >> second. >> is there any public comment? >> otherwise, all in favor? aye. >> resolution no. 1312 pass. >> item to 2nd amendment with san francisco bar pilots protective association around the term of the lease for a space located on pier 9. >> good afternoon, commissioners. my name is michael nerney. this item concerns the san francisco bar pilots established in 1835 as the harbor pilots for commercial ships in san francisco bay. the bar pilots have been attendant at the port since 1989. they are regulated by the state of california's

board. a business transportation and housing agency which has the responsibility for the movement of goods throughout the state of california. the member of pilot commissioners are appointed by governor brown. the bar pilots are part of the port and support in the meritime operations. due to out of state travel, president of the bar pilots and john, business director are unable to attend today's port commission meeting. if you would like we can proceed with this presentation as scheduled and answer any questions that you may have today, but to further a vote until a port commission meeting in may when the bar pilot representative are available to attend. >> i think we would like to

proceed with the presentation so we can ask questions. >> okay. the bar pilot premises at pier 9 include office space and shed space and used for birthing. this is a hybrid space that serves a 24 hour operation. they are operating vessels around-the-clock akin to a firehouse. the bar pilots currently was approved in 2008 and amended once in 2009. the current rent is 106,000 per month. the bar pilots are a meritime tenant in good standing. the bar pilots approached the port with an

offer to reopen the lease to each party's advantage. the primary advantages to the port are removing a 20 percent rent discount afforded to the bar pilots as a mechanism to retain their tenancy in san francisco amounting to $1.4 million. and providing for residential resets to the ports standard market rates every 5 years. the advantages for the bar pilots are eliminating a 3 percent cost-of-living increase from 2012 to 2014 amounting to $200,000 and a n allowing the rent to be set to market rate every 5 years. if approved, this amendment will give the port $1.2 million in additional

rent over the life of the lease while giving the bar pilots short-term financial flexibility. this item was presented to the port commission once before in october of 2011 but it was carried over due to the possibility that pier 9 might have been needed for super yacht for the american cup. this issue was resolved earlier this month when the american cup wrote in writing that it would not need it at all. the bar pilots lease was transacted in 2008 when it was higher and expected to go even higher. however, by 2009, the real estate market and world economy were in the midst of a deep

recession. consequently the bar pilots contracted rental rate per square foot per month are much higher than for comparable space both at the port and other downtown locations which are currently in the range of $2.50 per month. this means a net rate. which means that in addition the bar pilots are responsible for maintenance, utilities and janitorial services at their premises equivalent to at least $1 per square foot more than the base rent. meanwhile, between 2009 and 2012. ship traffic handled by the bar pilots decreased by an average of 12 percent --

annually or 6,000 vessel moves with a decline in revenue. the proposed second amount will provide the bar pilots with short-term financial stability and will allow the port to prevailing market rates. it will also have a positive net effect to the port generating $1.2 million more in earnings which the the difference between eliminating the 20 percent discount for 5 years and eliminating the 3 percent cost-of-living increase for 3 years. this concludes my presentation. both meritime and myself are present to answer any questions. the plan to

return to you in may for final consideration and approval. >> thank you. any public comment? hearing none. commissioners? >> i have a question for you. what was the make-up of the membership of the bar pilots? >> the bar pilots are comprised of 60 members. >> as far as the diversity, ethnicity, what is their make-up? >> i don't know. it's mostly men. there is one female pilot captain nancy wagner. >> do you know if they have any pilots of color, any women, any hispanics, any gays? is there any diversity in their work force, this is what i'm asking? >> i believe the bar -- i don't know about the ethnic make-up of the bar pilots. i just know they have 60 pilots who basically, the way they become

a pilot is there is a training period. the number is 60, that's been set by the board of pilot commissioners. when pilots are about to retire, they bring on train easy for a period of time of two years. those train easy need to be qualified people. usually they are ship captains or tugboat captains to enter into training program. the training program is 2 years and after people do retire then those train ees have the ability to enter the partnership. >> is there any inclusion or exclusion. do they included or exclude anyone. can you come back to me what their make-up is and are they making about

450,000 a year, is that roughly close to what they make? >> i have heard that they make a high salary. >> can you find out for me too, thank you. >> just to clarify on the latter question my understanding is that they operate on membership organization, the same way a lawfirm would and they participate in profit sharing and it from the height of the market when shipping volumes were much higher. we'll need to confirm but i don't think that's what they are making today. >> okay. i do have two sets of questions. one relate to our general leasing policy and second regarding this transaction. first of all, i guess -- well, let me ask this: so the 3 percent increase is

that a standard for our leasing policy for other tenants. >> can you come to the podium please. >> commissioner jeffrey bower, leasing manager. as far as the policy in leasing, nothing less than 2.5 or 2.3. we got away from cpi's. >> how many other leases do we have currently that have 3 percent increase. >> well, if we have 600 leases, i would feel comfortable with 40 percent have increase of 3-5 percent increase. >> what is the current policy? >> well, i believe it was -- it

should be stated as more of an incentive for the pilots to remain in san francisco. at the time the lease was signed they were considering moving to other cites, oakland, another part of the bay on this side. it was more of an incentive for them to sign. >> where is this? at the end of the pier? >> at the end of the pier. they have obstructed views. they look out to the east. one of the rooms to the north it's dramatic views. to the north and south they have no views. >> office space? >> we like to classify pier 9 as class b property. however,

their space is somewhat unique in pier 9 constructed 20 years ago. it doesn't meet a d.a. codes and energy efficiency codes. it's more of a compartmentalized office where the modern offices like pier 1 are open plans. that's what everybody wants. they don't want the compartmentalized office. it's a hybrid space. they have a gym, they have kitchens, they have accommodations for sleeping. so it's really a mixed, they do vessel -- they maintain the vessels. one thing that you should know is when we say that it is a class b property, you

do have to drive down about 500 feet of pier and then your entrance is a cyclone fence. so arguably there are components that are not up to a class b property. >> but i think they have mixed space, right? they share rent and we are not charging them for the same quality of space at the high rate. >> we are. they have two rates. they have the parking space, so paying a dollar a square foot for that and the rest of the space is about 19,000 square foot is lumped into the $4.15. if it's the bathroom or kitchen or beautiful conference room, it's kind of the new york lease. you throw a tape around it and that's what you are going to pay because that's what this size is. actually it

is. >> everybody else does that too, right? you are not unique in that sense? >> yeah. there could be space sensitivity. you could have in an office 3000 square foot office and 5,000 square foot of storage. you can say it's a dollar a square foot whereas your office is $3 a square foot. >> what was negotiated in the 1st amendment? >> the 1st amendment was to clean up some of the lease, push out the start date for a period of time and reconcile the amount of or the method of payment of the security deposit whether it's cash or a letter of credit. >> okay. so i guess in terms of we've never actually seen any

financials from them since we are not sure what their salaries are and we do know that maybe the shipping volume was down but we don't know they were any where close to being bankrupt? >> right. >> they were able to pay their rent on time? >> they are in good standing. >> they set the rate and charges at the state level by state action, but they operate as a semi private entity. their financial statements are not publically available and salaries are not publically available. and so we often participate in those rate hearings when they are before the state. so this was in the staff report says that this was negotiated at the highest rate at the time in the market. and why was the initial rate so